Stocks: New High for the S&P 500; Under Armour Gains Most Since February

By Ben Levisohn

It was the night before the ECB–and two before US payrolls–and all through the market nothing was stirring, not even…Alright. Some things were stirring, like the shares of Protective Life (PL), Travelers Companies (TRV), Under Armour (UA), Broadcom (BRCM) and Vanda Pharmaceuticals (VNDA).

REUTERS

The S&P 500 rose 0.2% to 1,927.88, its 16th record high of the year, while the Dow Jones Industrial Average ticked up 0.1% to 16,737.53. The Nasdaq Composite rose 0.4% to 4,251.64, ending a three-day losing streak, while the small-company Russell 2000 finally joined in the fun by gaining 0.5% to 1,131.22.

Travelers Companies rose 1.4% to a new-52-week high of $94.67, making it the biggest winner in the Dow Jones Industrial Average today. Travelers–and other insurers–got a big boost from Protective Life, which agreed to be bought by Japan’s Dai-ichi Life for $5.7 billion, or $70 a share. Protective Life gained 17% to $69.36 today, but thanks to a quirk in indexing–its too big for the Russell 2000, too small for the S&P 500–doesn’t top either of them.

Under Armour topped the S&P 500 with a 4.9% gained to $53.62. Under Armour was upgraded to Buy from Hold at Jefferies today.

Broadcom was among the Nasdaq 100′s big winners after gaining 3.3% to $37.07. Broadcom was upgraded to Buy from Hold at Drexel Hamilton today.

There was plenty of economic data to get traders off the sideline today: ADP Employer Services says the US added 179,000 jobs in May, well below forecasts for 210,000; the U.S. trade deficit widened to $47.2 billion in April, far bigger than expected and a drag on second-quarter GDP; and the Beige Book confirmed that a Spring bounce in the economy is, in fact, underway. It was all met with a yawn as investors wait for the European Central Bank to do whatever it’s going to do–the smart money appears to be betting on negative deposit rates but no QE–and for the US payrolls data on Friday.

Capital Economics’ Jack Allen doesn’t think the ECB will have much impact on the strength of the euro:

Further easing by the ECB today will not necessarily weaken the euro as widely-expected cuts to the central bank’s refinancing and deposit rates are probably already discounted. But we think that the ECB will eventually introduce bolder stimulus that will drive the currency lower over the next year and a half…

As it happens, we think the ECB will go a step further, introducing measures to incentivise bank lending. But unless these were very bold, we doubt they would have a big influence on the currency either.

Our sense is that the ECB would need to announce a large-scale quantitative easing (QE) programme in order to weaken the euro substantially. There is only an outside chance of such a programme being introduced this month. But Draghi could drop stronger hints in his press conference that it is a viable option. We think that it will be necessary in order to head off the threat of a prolonged period of very low inflation, or even deflation.

Societe Generale’s Roland Kaloyan and team consider where the S&P 500 will be in ten years:

US equities face three headwinds: cyclically-adjusted valuations (CAPE, starting date 1881) have returned to very expensive territory, corporate margins stand at historically high levels, and after already five years of growth from the 2009 trough, we estimate that the probability of another recession kicking in is close to 100% within the forecast timeframe (the longest cycle ever was 120 months, or 10 years). But US equities have supports as well, such as impressively strong balance sheets and the beginning of a new M&A cycle, backed by a highly reactive central bank…Excluding dividends, we expect the S&P 500 would rise +3% per annum [to 2,500].

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.